Delhi HC sets aside Notice u/s 148A(b) of  Income Tax Act, citing Bar by Limitation [Read Order]

The Delhi High Court sets aside notice under section 148 A(b) of the Income Tax Act,1961, considering its bar by limitation. The bench viewed that the import of the order is not to obliterate the timelines stipulated for issuing the notice under Section 148 of the Act.

ADM Agro Industries Private Limited, the petitioner is a private company incorporated under the laws of India and is engaged in the business of manufacturing/extraction/trading/refining/ processing and packaging of edible oils and other agro-based products. The petitioner filed its return of income under Section 139(1) of the Income Tax Act, 1961 [the Act] in respect of Assessment Year [AY] 2014-15 on 30.11.2014 declaring its taxable income as nil.

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The assessment proceedings culminated with the Assessing Officer [AO] passing an assessment order dated 30.12.2016 under Section 143(3) of the Act. On 30.06.2021, the AO issued a notice under Section 148 of the Act. Although the said notice was issued after 31.03.2021, the procedure as prescribed under Section 148A of the Act was not followed. The petitioner challenged the said notice in a writ petition filed before this court [being W.P. (C) No. 7274/2021].

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The supreme court directed that the requirement to conduct any preliminary enquiry under Section 148A(a) of the Act was dispensed with and the AO was also directed to provide the assessee’s information, which suggested that the income of the assesse had escaped assessment, as was required to be furnished alongwith a notice under Section 148A(b) of the Act.

The AO provided information to the Assessee under a notice dated 26.05.2022 under Section 148A(b) of the Act.The AO passed an order under Section 148A(d) of the Act holding that it was a fit case for issuance of the notice under Section 148 of the Act for AY 2014-15. The said order was communicated to the Assessee along with a notice dated 23.07.2022 issued under Section 148 of the Act. 

The petitioner challenged the said notice dated 23.07.2022 by filing a writ petition before the court inter alia, on the ground that the same had been passed without considering the petitioner’s response to the information as furnished by the AO. The said petition was allowed by this court by an order dated 06.12.2022 inasmuch as the order dated 23.07.2022 passed under Section 148A(d) of the Act was set aside and the matter was remanded to the AO for a de novo hearing. 

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According to sub-section (2) of section 150, the provisions of sub-section (1) mean that an appellate or revisional authority cannot give a direction for assessment or reassessment which goes to the extent of conferring jurisdiction upon the Assessing Officer if his  jurisdiction had ceased due to the bar of limitation. If the issuing of a notice for assessment or reassessment for a particular assessment year had become time-barred at the time of the order, which was the subject-matter of the appeal, the provisions of section 150(1) cannot be invoked to the aid of the Revenue for making an assessment or reassessment.

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A division bench of  Justice Vibhu Bakhru and Justice Tejas Karia found that  notice under Section 148 of the Act which was subject matter of challenge in the writ petition was barred by limitation on the date, it was issued by virtue of Section 149(1) of the Act. Thus, any order passed in a challenge to the said notice would not have the effect of obliterating the time limits for passing such an order.      

The bench viewed that the import of the order is not to obliterate the timelines stipulated for issuing the notice under Section 148 of the Act. On the contrary, it was incumbent on the AO to examine whether it was a fit case for issuance of a notice under Section 148 of the Act, which would not be the case if issuance of such a notice was barred by limitation. 

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The matter had been remanded to the AO for a fresh consideration in light of the challenge raised by the petitioner. The import of the said order dated 06.12.2022 was not to foreclose any right or contention of the parties. The court set aside the order dated 31.03.2024 issued under Section 148A(d) of the Act, and the notice dated 01.04.2024 issued under Section 148 of the Act.

To Read the full text of the Order CLICK HERE

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